Conmed Corp Valuation – August 2018 $CNMD

Company Profile (excerpt from Reuters): CONMED Corporation, incorporated on February 10, 1970, is a medical technology company. The Company is engaged in the development, manufacturing and sale on a global basis of surgical devices and related equipment. The Company provides surgical devices and equipment for minimally invasive procedures. The Company’s products are used by surgeons and physicians in a range of specialties, including orthopedics, general surgery, gynecology, neurosurgery and gastroenterology. The Company’s product lines consist of orthopedic surgery, general surgery and surgical visualization. As of December 31, 2016, the Company’s products are distributed domestically directly to over 6,000 hospitals, surgery centers and other healthcare institutions, as well as through medical specialty distributors.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CNMD – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $2,187,212,094 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.15 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 210.00% Pass
6. Moderate PEmg Ratio PEmg < 20 51.15 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.57 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.15 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.42 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $1.57
MG Growth Estimate 6.75%
MG Value $34.59
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $22.79
MG Value based on 0% Growth $13.36
Market Implied Growth Rate 21.32%
Current Price $80.40
% of Intrinsic Value 232.42%

CONMED Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.08 in 2014 to an estimated $1.57 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 21.32% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into CONMED Corporation revealed the company was trading above its Graham Number of $33.13. The company pays a dividend of $0.8 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 51.15, which was above the industry average of 44.66. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.78.

CONMED Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.78
Graham Number $33.13
PEmg 51.15
Current Ratio 2.15
PB Ratio 3.57
Current Dividend $0.80
Dividend Yield 1.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

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GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Total Current Assets $342,378,000
Total Current Liabilities $159,300,000
Long-Term Debt $442,408,000
Total Assets $1,350,034,000
Intangible Assets $821,515,000
Total Liabilities $707,406,000
Shares Outstanding (Diluted Average) 28,573,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.16
Dec2017 $1.97
Dec2016 $0.52
Dec2015 $1.09
Dec2014 $1.16
Dec2013 $1.28
Dec2012 $1.41
Dec2011 $0.03
Dec2010 $1.05
Dec2009 $0.42
Dec2008 $1.37
Dec2007 $1.43
Dec2006 -$0.45
Dec2005 $1.08
Dec2004 $1.11
Dec2003 $1.10
Dec2002 $1.23
Dec2001 $1.00
Dec2000 $0.83
Dec1999 $1.17
Dec1998 $0.77

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.57
Dec2017 $1.25
Dec2016 $0.96
Dec2015 $1.12
Dec2014 $1.08
Dec2013 $0.98
Dec2012 $0.84
Dec2011 $0.65
Dec2010 $0.90
Dec2009 $0.80
Dec2008 $0.97
Dec2007 $0.79
Dec2006 $0.59
Dec2005 $1.11
Dec2004 $1.10
Dec2003 $1.08
Dec2002 $1.05

Recommended Reading:

Other ModernGraham posts about the company

CONMED Corporation Valuation – Initial Coverage $CNMD

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

CONMED Corporation Valuation – Initial Coverage $CNMD

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – January 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how CONMED Corporation (CNMD) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): CONMED Corporation is a medical technology company. The Company is engaged in the development, manufacturing and sale on a global basis of surgical devices and related equipment. Its products are used by surgeons and physicians in a range of specialties, including orthopedics, general surgery, gynecology, neurosurgery and gastroenterology. Its product lines consist of orthopedic surgery, general surgery and surgical visualization. Its orthopedic surgery product lines include sports medicine, powered surgical instruments, and sports biologics and tissue. Its general surgery product line offers a range of products in the areas of advanced surgical, endoscopic technologies and critical care. Its surgical visualization product line offers imaging systems for use in minimally invasive orthopedic and general surgery procedures. Its products are distributed domestically directly to over 6,000 hospitals and other healthcare institutions, as well as through medical specialty distributors.

CNMD Chart

CNMD data by YCharts

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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CNMD – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,179,576,997 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 3.27 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -4.66% Fail
6. Moderate PEmg Ratio PEmg < 20 40.97 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.08 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 3.27 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.91 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $1.06
MG Growth Estimate 4.05%
MG Value $17.60
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $15.38
MG Value based on 0% Growth $9.02
Market Implied Growth Rate 16.24%
Current Price $43.46
% of Intrinsic Value 246.94%

CONMED Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings growth over the last ten years, the poor dividend history, and the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.84 in 2012 to an estimated $1.06 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 16.21% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into CONMED Corporation revealed the company was trading above its Graham Number of $19.68. The company pays a dividend of $0.8 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 40.92, which was above the industry average of 32.29. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.49.

CONMED Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$13.49
Graham Number $19.68
PEmg 40.92
Current Ratio 3.27
PB Ratio 2.08
Current Dividend $0.80
Dividend Yield 1.84%
Number of Consecutive Years of Dividend Growth 0

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ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Total Current Assets $369,376,000
Total Current Liabilities $112,860,000
Long-Term Debt $490,176,000
Total Assets $1,330,724,000
Intangible Assets $822,592,000
Total Liabilities $746,549,000
Shares Outstanding (Diluted Average) 27,951,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.82
Dec2015 $1.09
Dec2014 $1.16
Dec2013 $1.28
Dec2012 $1.41
Dec2011 $0.03
Dec2010 $1.05
Dec2009 $0.42
Dec2008 $1.37
Dec2007 $1.43
Dec2006 -$0.45
Dec2005 $1.08
Dec2004 $1.11
Dec2003 $1.10
Dec2002 $1.23
Dec2001 $1.00
Dec2000 $0.83
Dec1999 $1.17
Dec1998 $0.77
Dec1997 -$0.31
Dec1996 $0.75

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.06
Dec2015 $1.12
Dec2014 $1.08
Dec2013 $0.98
Dec2012 $0.84
Dec2011 $0.65
Dec2010 $0.90
Dec2009 $0.80
Dec2008 $0.97
Dec2007 $0.79
Dec2006 $0.59
Dec2005 $1.11
Dec2004 $1.10
Dec2003 $1.08
Dec2002 $1.05
Dec2001 $0.87
Dec2000 $0.75

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

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Thermo Fisher Scientific Inc Valuation – December 2016 $TMO
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Thermo Fisher Scientific Inc Valuation – November 2016 $TMO

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Henry Schein Inc Valuation – January 2019 $HSIC

Company Profile (excerpt from Reuters): Henry Schein, Inc., incorporated on December 23, 1992, is a provider of healthcare products and services primarily to office-based dental, animal health and medical practitioners. The Company operates through two segments: healthcare distribution, and technology and value-added services. The Company provides its services to dental practitioners and laboratories, animal health clinics and physician practices, as well as government, institutional healthcare clinics and other alternate care clinics. As of December 31, 2016, the Company operated in 33 countries, including the United States, Australia, Austria, Belgium, Brazil, Canada, Chile, China, the Czech Republic, Denmark, France, Germany, Hong Kong Special Administrative Region, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, Malaysia, the Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, South Africa, Spain, Sweden, Switzerland, Thailand and the United Kingdom.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of HSIC – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,356,631,000 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.30 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 71.93% Pass
6. Moderate PEmg Ratio PEmg < 20 24.03 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.35 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.30 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.04 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.10
MG Growth Estimate 4.56%
MG Value $54.64
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $44.95
MG Value based on 0% Growth $26.35
Market Implied Growth Rate 7.77%
Current Price $74.50
% of Intrinsic Value 136.35%

Henry Schein, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the low current ratio, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.38 in 2014 to an estimated $3.1 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 7.77% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Henry Schein, Inc. revealed the company was trading above its Graham Number of $39.02. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 24.03, which was below the industry average of 52.7, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.08.

Henry Schein, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.08
Graham Number $39.02
PEmg 24.03
Current Ratio 1.30
PB Ratio 3.35
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $4,193,952,000
Total Current Liabilities $3,229,785,000
Long-Term Debt $1,000,315,000
Total Assets $8,390,310,000
Intangible Assets $3,303,882,000
Total Liabilities $4,973,594,000
Shares Outstanding (Diluted Average) 153,614,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.70
Dec2017 $2.57
Dec2016 $3.10
Dec2015 $2.85
Dec2014 $2.72
Dec2013 $2.47
Dec2012 $2.16
Dec2011 $1.99
Dec2010 $1.75
Dec2009 $1.72
Dec2008 $1.32
Dec2007 $1.18
Dec2006 $0.91
Dec2005 $0.79
Dec2004 $0.33
Dec2003 $0.36
Dec2002 $0.31
Dec2001 $0.25
Dec2000 $0.34
Dec1999 $0.30
Dec1998 $0.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.10
Dec2017 $2.78
Dec2016 $2.81
Dec2015 $2.59
Dec2014 $2.38
Dec2013 $2.14
Dec2012 $1.92
Dec2011 $1.73
Dec2010 $1.52
Dec2009 $1.33
Dec2008 $1.06
Dec2007 $0.86
Dec2006 $0.65
Dec2005 $0.48
Dec2004 $0.32
Dec2003 $0.32
Dec2002 $0.29

Recommended Reading:

Other ModernGraham posts about the company

Henry Schein Inc Valuation – March 2018 $HSIC
Henry Schein Inc Valuation – July 2016 $HSIC
Henry Schein Inc Valuation – February 2016 Update $HSIC
Henry Schein Inc. Valuation – October 2015 Update $HSIC
The Best Companies of the Medical Industry – September 2015

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Medtronic PLC Valuation – January 2019 $MDT

Company Profile (excerpt from Reuters): Medtronic Public Limited Company (Medtronic), incorporated on June 12, 2014, is a medical technology, services and solutions company. The Company operates in four segments: Cardiac and Vascular Group, Minimally Invasive Therapies Group, Restorative Therapies Group and Diabetes Group. The Cardiac and Vascular Group segment includes cardiac rhythm and heart failure, coronary and structural heart, and aortic and peripheral vascular. Its Minimally Invasive Therapies Group segment includes surgical solutions, and patient monitoring and recovery. Its Restorative Therapies Group segment includes spine, neuromodulation, surgical technologies and neurovascular. Its Diabetes Group segment includes intensive insulin management, non-intensive diabetes therapies, and diabetes services and solutions. The Company’s subsidiaries include Medtronic, Inc. and HeartWare International, Inc.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MDT – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $118,362,552,161 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.56 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 4.53% Fail
6. Moderate PEmg Ratio PEmg < 20 28.33 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.41 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.56 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.79 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.11
MG Growth Estimate 0.94%
MG Value $32.29
Opinion Overvalued
MG Grade B
MG Value based on 3% Growth $45.11
MG Value based on 0% Growth $26.45
Market Implied Growth Rate 9.91%
Current Price $88.13
% of Intrinsic Value 272.93%

Medtronic PLC is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth over the last ten years, and the high PEmg ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.93 in 2015 to an estimated $3.11 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 9.91% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Medtronic PLC revealed the company was trading above its Graham Number of $60.27. The company pays a dividend of $1.84 per share, for a yield of 2.1%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 28.33, which was below the industry average of 52.7, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-12.33.

Medtronic PLC performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$12.33
Graham Number $60.27
PEmg 28.33
Current Ratio 2.56
PB Ratio 2.41
Current Dividend $1.84
Dividend Yield 2.09%
Number of Consecutive Years of Dividend Growth 20

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 10/1/2018
Total Current Assets $21,653,000,000
Total Current Liabilities $8,463,000,000
Long-Term Debt $23,663,000,000
Total Assets $88,150,000,000
Intangible Assets $59,424,000,000
Total Liabilities $38,436,000,000
Shares Outstanding (Diluted Average) 1,360,900,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.31
Apr2018 $2.27
Apr2017 $2.89
Apr2016 $2.48
Apr2015 $2.41
Apr2014 $3.02
Apr2013 $3.37
Apr2012 $3.41
Apr2011 $2.86
Apr2010 $2.79
Apr2009 $1.84
Apr2008 $1.95
Apr2007 $2.41
Apr2006 $2.09
Apr2005 $1.48
Apr2004 $1.60
Apr2003 $1.30
Apr2002 $0.80
Apr2001 $0.85
Apr2000 $0.89
Apr1999 $0.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.11
Apr2018 $2.55
Apr2017 $2.73
Apr2016 $2.75
Apr2015 $2.93
Apr2014 $3.15
Apr2013 $3.10
Apr2012 $2.83
Apr2011 $2.49
Apr2010 $2.27
Apr2009 $1.99
Apr2008 $2.01
Apr2007 $1.96
Apr2006 $1.64
Apr2005 $1.34
Apr2004 $1.21
Apr2003 $0.96

Recommended Reading:

Other ModernGraham posts about the company

Medtronic PLC Valuation – March 2018 $MDT
Medtronic PLC Valuation – July 2016 $MDT
Medtronic PLC Valuation – January 2016 Update $MDT
Medtronic PLC Valuation – October 2015 Update $MDT
Medtronic Inc. Analysis – July 2015 Update $MDT

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STERIS PLC Valuation – August 2018 $STE
CryoLife Inc Valuation – August 2018 $CRY
Charles River Laboratories International Inc Valuation – August 2018 $CRL
Surmodics Inc Valuation – August 2018 $SRDX
Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

UnitedHealth Group Inc Valuation – November 2018 $UNH

Company Profile (excerpt from Reuters): UnitedHealth Group Incorporated, incorporated on July 1, 2015, is a health and well-being company. The Company operates through four segments: UnitedHealthcare, OptumHealth, OptumInsight and OptumRx. The Company conducts its operations through two business platforms: health benefits operating under UnitedHealthcare and health services operating under Optum. UnitedHealthcare provides healthcare benefits to an array of customers and markets, and includes UnitedHealthcare Employer & Individual, UnitedHealthcare Medicare & Retirement, UnitedHealthcare Community & State, and UnitedHealthcare Global businesses. Optum is a health services business serving the healthcare marketplace, including payers, care providers, employers, governments, life sciences companies and consumers, through its OptumHealth, OptumInsight and OptumRx businesses.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of UNH – November 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $253,928,946,752 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.69 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 149.05% Pass
6. Moderate PEmg Ratio PEmg < 20 27.73 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.93 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.69 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.82 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $9.52
MG Growth Estimate 11.81%
MG Value $305.75
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $138.04
MG Value based on 0% Growth $80.92
Market Implied Growth Rate 9.61%
Current Price $263.95
% of Intrinsic Value 86.33%

UnitedHealth Group Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $5.33 in 2014 to an estimated $9.52 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 9.61% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into UnitedHealth Group Inc revealed the company was trading above its Graham Number of $115.81. The company pays a dividend of $2.88 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 27.73, which was below the industry average of 50.45, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-60.77.

UnitedHealth Group Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$60.77
Graham Number $115.81
PEmg 27.73
Current Ratio 0.69
PB Ratio 4.93
Current Dividend $2.88
Dividend Yield 1.09%
Number of Consecutive Years of Dividend Growth 8

 

Useful Links:

ModernGraham tagged articles Morningstar
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Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Total Current Assets $38,754,000,000
Total Current Liabilities $56,377,000,000
Long-Term Debt $32,053,000,000
Total Assets $151,087,000,000
Intangible Assets $68,201,000,000
Total Liabilities $98,491,000,000
Shares Outstanding (Diluted Average) 983,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $12.09
Dec2017 $10.72
Dec2016 $7.25
Dec2015 $6.01
Dec2014 $5.70
Dec2013 $5.50
Dec2012 $5.28
Dec2011 $4.73
Dec2010 $4.10
Dec2009 $3.24
Dec2008 $2.40
Dec2007 $3.42
Dec2006 $2.97
Dec2005 $2.31
Dec2004 $1.83
Dec2003 $1.34
Dec2002 $1.07
Dec2001 $0.70
Dec2000 $0.55
Dec1999 $0.40
Dec1998 -$0.14

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.52
Dec2017 $7.84
Dec2016 $6.24
Dec2015 $5.64
Dec2014 $5.33
Dec2013 $4.95
Dec2012 $4.43
Dec2011 $3.87
Dec2010 $3.36
Dec2009 $2.95
Dec2008 $2.74
Dec2007 $2.73
Dec2006 $2.22
Dec2005 $1.71
Dec2004 $1.31
Dec2003 $0.97
Dec2002 $0.70

Recommended Reading:

Other ModernGraham posts about the company

UnitedHealth Group Inc Valuation – February 2018 $UNH
UnitedHealth Group Inc Valuation – February 2017 $UNH
UnitedHealth Group Inc. Valuation – November 2015 Update $UNH
26 Companies in the Spotlight This Week – 11/22/14
UnitedHealth Group Inc. Annual Valuation – 2014 $UNH

Other ModernGraham posts about related companies

Luminex Corp Valuation – October 2018 $LMNX
LHC Group Inc Valuation – September 2018 $LHCG
Chartwell Retirement Residences Valuation – August 2018 $TSE:CSH.UN
STERIS PLC Valuation – August 2018 $STE
CryoLife Inc Valuation – August 2018 $CRY
Charles River Laboratories International Inc Valuation – August 2018 $CRL
Surmodics Inc Valuation – August 2018 $SRDX
Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Luminex Corp Valuation – October 2018 $LMNX

Company Profile (excerpt from Reuters): Luminex Corporation, incorporated on June 19, 1998, develops, manufactures and sells biological testing technologies with applications throughout the diagnostics, pharmaceutical and life sciences industries. The Company’s products are focused on the molecular diagnostic testing market, which includes human genetics, personalized medicine and infectious disease segments. The Company has a range of instruments using its xMAP technology, which includes its LUMINEX 100/200 systems offer 100-plex testing; the Company’s FLEXMAP 3D system is its high-throughput, 500-plex testing system, and its MAGPIX system provides 50-plex testing using imaging rather than flow cytometry. By using its xMAP technology, the end users are able to generate multiple simultaneous results per sample. The Company primarily serves the diagnostics, pharmaceutical and life sciences industries by marketing products, including its testing equipment and assays, to a range of testing laboratories.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LMNX – October 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,281,599,628 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 6.76 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 67.42% Pass
6. Moderate PEmg Ratio PEmg < 20 49.03 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.73 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 6.76 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.59
MG Growth Estimate 3.76%
MG Value $9.38
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $8.50
MG Value based on 0% Growth $4.98
Market Implied Growth Rate 20.26%
Current Price $28.73
% of Intrinsic Value 306.22%

Luminex Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $0.47 in 2014 to an estimated $0.59 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 20.26% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Luminex Corporation revealed the company was trading above its Graham Number of $10.65. The company pays a dividend of $0.24 per share, for a yield of 0.8% Its PEmg (price over earnings per share – ModernGraham) was 49.03, which was below the industry average of 54.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $4.55.

Luminex Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $4.55
Graham Number $10.65
PEmg 49.03
Current Ratio 6.76
PB Ratio 2.73
Current Dividend $0.24
Dividend Yield 0.84%
Number of Consecutive Years of Dividend Growth 1

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $245,843,000
Total Current Liabilities $36,381,000
Long-Term Debt $0
Total Assets $510,228,000
Intangible Assets $163,990,000
Total Liabilities $44,699,000
Shares Outstanding (Diluted Average) 44,246,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.50
Dec2017 $0.67
Dec2016 $0.32
Dec2015 $0.86
Dec2014 $0.93
Dec2013 $0.17
Dec2012 $0.30
Dec2011 $0.34
Dec2010 $0.12
Dec2009 $0.43
Dec2008 $0.08
Dec2007 -$0.08
Dec2006 $0.05
Dec2005 -$0.09
Dec2004 -$0.12
Dec2003 -$0.14
Dec2002 -$0.85
Dec2001 -$0.55
Dec2000 -$0.52
Dec1999 -$0.96
Dec1998 -$0.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.59
Dec2017 $0.62
Dec2016 $0.56
Dec2015 $0.63
Dec2014 $0.47
Dec2013 $0.25
Dec2012 $0.28
Dec2011 $0.24
Dec2010 $0.16
Dec2009 $0.15
Dec2008 $0.00
Dec2007 -$0.06
Dec2006 -$0.11
Dec2005 -$0.24
Dec2004 -$0.36
Dec2003 -$0.52
Dec2002 -$0.69

Recommended Reading:

Other ModernGraham posts about the company

Luminex Corp Valuation – Initial Coverage $LMNX

Other ModernGraham posts about related companies

LHC Group Inc Valuation – September 2018 $LHCG
Chartwell Retirement Residences Valuation – August 2018 $TSE:CSH.UN
STERIS PLC Valuation – August 2018 $STE
CryoLife Inc Valuation – August 2018 $CRY
Charles River Laboratories International Inc Valuation – August 2018 $CRL
Surmodics Inc Valuation – August 2018 $SRDX
Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

LHC Group Inc Valuation – September 2018 $LHCG

Company Profile (excerpt from Reuters): LHC Group, Inc., incorporated on January 20, 2005, is a holding company. The Company provides post-acute healthcare services to patients through its home nursing agencies, hospice agencies, community-based services agencies and long-term acute care hospitals (LTACHs). The Company operates through four segments: home health services, hospice services, community-based services and facility-based services. As of December 31, 2016, through its subsidiaries, equity joint ventures and controlled affiliates, the Company operated in 372 service providers in 26 states within the continental United States.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of LHCG – September 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,072,215,649 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.59 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 72.60% Pass
6. Moderate PEmg Ratio PEmg < 20 41.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.21 Pass
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.59 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.86 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.39
MG Growth Estimate 15.00%
MG Value $91.91
Opinion Fairly Valued
MG Grade D+
MG Value based on 3% Growth $34.62
MG Value based on 0% Growth $20.29
Market Implied Growth Rate 16.29%
Current Price $98.05
% of Intrinsic Value 106.68%

LHC Group, Inc. does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.15 in 2014 to an estimated $2.39 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 16.29% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into LHC Group, Inc. revealed the company was trading above its Graham Number of $39.19. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 41.07, which was below the industry average of 55.37, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-5.42.

LHC Group, Inc. scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$5.42
Graham Number $39.19
PEmg 41.07
Current Ratio 1.59
PB Ratio 2.21
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $350,436,000
Total Current Liabilities $220,005,000
Long-Term Debt $242,265,000
Total Assets $1,881,670,000
Intangible Assets $1,443,914,000
Total Liabilities $517,175,000
Shares Outstanding (Diluted Average) 30,742,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.70
Dec2017 $2.79
Dec2016 $2.07
Dec2015 $1.84
Dec2014 $1.26
Dec2013 $1.30
Dec2012 $1.53
Dec2011 -$0.73
Dec2010 $2.68
Dec2009 $2.43
Dec2008 $1.69
Dec2007 $1.11
Dec2006 $1.27
Dec2005 $0.59
Dec2004 $0.76
Dec2003 $0.23
Dec2002 $0.23
Dec2001 $0.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.39
Dec2017 $2.10
Dec2016 $1.71
Dec2015 $1.36
Dec2014 $1.15
Dec2013 $1.21
Dec2012 $1.29
Dec2011 $1.26
Dec2010 $2.11
Dec2009 $1.69
Dec2008 $1.24
Dec2007 $0.94
Dec2006 $0.78
Dec2005 $0.48
Dec2004 $0.37
Dec2003 $0.15
Dec2002 $0.09

Recommended Reading:

Other ModernGraham posts about the company

LHC Group Inc Valuation – Initial Coverage $LHCG

Other ModernGraham posts about related companies

Chartwell Retirement Residences Valuation – August 2018 $TSE:CSH.UN
STERIS PLC Valuation – August 2018 $STE
CryoLife Inc Valuation – August 2018 $CRY
Charles River Laboratories International Inc Valuation – August 2018 $CRL
Surmodics Inc Valuation – August 2018 $SRDX
Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Chartwell Retirement Residences Valuation – August 2018 $TSE:CSH.UN

Company Profile (excerpt from Reuters): Chartwell Retirement Residences is an unincorporated, open-ended trust. The Company indirectly owns, manages and operates a range of seniors housing communities from independent living through assisted living to long term care. Its segments include Canadian Retirement Operations and Canadian Long Term Care Operations. It owns and operates senior residences in Canada. Its portfolio of residences includes independent living residences for seniors that include retirement units/townhouses/bungalows providing meals and general services; independent supported living residences for seniors that include retirement units/townhouses/bungalows with household general services; assisted living residences for seniors requiring personal care services; memory care units for seniors having Alzheimer’s or other form of dementia and requiring personal care services, and Long term care residences for people requiring professional nursing care on a daily basis and over 24-hour supervision.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TSE-CSH.UN – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $3,254,692,829 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.14 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -112.80% Fail
6. Moderate PEmg Ratio PEmg < 20 48.07 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.30 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.14 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -5.89 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.32
MG Growth Estimate 15.00%
MG Value $12.36
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $4.65
MG Value based on 0% Growth $2.73
Market Implied Growth Rate 19.78%
Current Price $15.43
% of Intrinsic Value 124.85%

Chartwell Retirement Residences does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of earnings stability over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $-0.22 in 2014 to an estimated $0.32 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 19.78% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Chartwell Retirement Residences revealed the company was trading above its Graham Number of $3.45. The company pays a dividend of $0.57 per share, for a yield of 3.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 48.07, which was above the industry average of 44.66. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-10.83.

Chartwell Retirement Residences scores quite poorly in the ModernGraham grading system, with an overall grade of D.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$10.83
Graham Number $3.45
PEmg 48.07
Current Ratio 0.14
PB Ratio 3.30
Current Dividend $0.57
Dividend Yield 3.71%
Number of Consecutive Years of Dividend Growth 3

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $52,301,000
Total Current Liabilities $378,657,000
Long-Term Debt $1,923,491,000
Total Assets $3,311,179,000
Intangible Assets $55,343,000
Total Liabilities $2,328,737,000
Shares Outstanding (Diluted Average) 210,226,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.11
Dec2017 $0.06
Dec2016 $0.03
Dec2015 $1.99
Dec2014 -$0.05
Dec2013 $0.14
Dec2012 -$0.80
Dec2011 -$0.43
Dec2010 -$0.43
Dec2009 -$0.68
Dec2008 -$1.03
Dec2007 -$0.76
Dec2006 -$0.24
Dec2005 -$0.28
Dec2004 -$0.19
Dec2003 -$0.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.32
Dec2017 $0.43
Dec2016 $0.50
Dec2015 $0.54
Dec2014 -$0.22
Dec2013 -$0.36
Dec2012 -$0.63
Dec2011 -$0.58
Dec2010 -$0.65
Dec2009 -$0.70
Dec2008 -$0.64
Dec2007 -$0.40
Dec2006 -$0.20
Dec2005 -$0.15
Dec2004 -$0.08
Dec2003 -$0.02

Recommended Reading:

Other ModernGraham posts about the company

Chartwell Retirement Residences Valuation – Initial Coverage $TSE:CSH.UN

Other ModernGraham posts about related companies

Charles River Laboratories International Inc Valuation – August 2018 $CRL
Surmodics Inc Valuation – August 2018 $SRDX
Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN
Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

STERIS PLC Valuation – August 2018 $STE

Company Profile (excerpt from Reuters): STERIS plc provides infection prevention and other procedural products and services. The Company operates through four segments: Healthcare Products, which offers infection prevention and procedural solutions for healthcare providers, including capital equipment and related maintenance, and installation services, as well as consumables; Healthcare Specialty Services, which provides a range of specialty services for healthcare providers, including hospital sterilization services, instrument and scope repairs, and linen management; Life Sciences, which offers capital equipment and consumable products, and equipment maintenance and specialty services for pharmaceutical manufacturers and research facilities, and Applied Sterilization Technologies, which offers contract sterilization and laboratory services for medical device and pharmaceutical customers and others. Its Corporate and other segment includes the Defense and Industrial business unit.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of STE – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,719,200,529 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 2.65 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 75.38% Pass
6. Moderate PEmg Ratio PEmg < 20 37.43 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.17 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 2.65 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 2.15 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $3.07
MG Growth Estimate 5.59%
MG Value $60.45
Opinion Overvalued
MG Grade C
MG Value based on 3% Growth $44.53
MG Value based on 0% Growth $26.11
Market Implied Growth Rate 14.46%
Current Price $114.95
% of Intrinsic Value 190.15%

Steris PLC is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor is only concerned with the level of debt relative to the net current assets. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $2.24 in 2015 to an estimated $3.07 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 14.46% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Steris PLC revealed the company was trading above its Graham Number of $62.94. The company pays a dividend of $1.21 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 37.43, which was below the industry average of 44.66, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-11.27.

Steris PLC receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$11.27
Graham Number $62.94
PEmg 37.43
Current Ratio 2.65
PB Ratio 3.17
Current Dividend $1.21
Dividend Yield 1.05%
Number of Consecutive Years of Dividend Growth 13

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $988,889,000
Total Current Liabilities $373,842,000
Long-Term Debt $1,320,064,000
Total Assets $5,051,814,000
Intangible Assets $3,032,408,000
Total Liabilities $1,952,626,000
Shares Outstanding (Diluted Average) 85,509,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.66
Mar2018 $3.39
Mar2017 $1.28
Mar2016 $1.56
Mar2015 $2.25
Mar2014 $2.17
Mar2013 $2.72
Mar2012 $2.31
Mar2011 $0.85
Mar2010 $2.16
Mar2009 $1.86
Mar2008 $1.20
Mar2007 $1.25
Mar2006 $1.02
Mar2005 $1.23
Mar2004 $1.33
Mar2003 $1.12
Mar2002 $0.65
Mar2001 $0.02
Mar2000 $0.15
Mar1999 $1.20

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.07
Mar2018 $2.23
Mar2017 $1.76
Mar2016 $2.07
Mar2015 $2.24
Mar2014 $2.17
Mar2013 $2.10
Mar2012 $1.76
Mar2011 $1.47
Mar2010 $1.69
Mar2009 $1.41
Mar2008 $1.19
Mar2007 $1.19
Mar2006 $1.13
Mar2005 $1.08
Mar2004 $0.88
Mar2003 $0.65

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

CryoLife Inc Valuation – August 2018 $CRY

Company Profile (excerpt from Reuters): CryoLife, Inc. (CryoLife), incorporated on January 19, 1984, is a medical device manufacturer and processor, and is engaged in the distribution of medical devices and implantable human tissues used in cardiac surgical procedures. The Company operates through two segments: Medical Devices and Preservation Services. The Medical Devices segment includes medical devices, such as BioGlue Surgical Adhesive (BioGlue), BioFoam Surgical Matrix (BioFoam), On-X Life Technologies Holdings, Inc. (ON-X) valves and surgical products, CardioGenesis cardiac laser therapy product line, PerClot and PhotoFix. The Preservation Services segment includes external services, such as preservation of cardiac and vascular tissues. The cardiac and vascular human tissues distributed by CryoLife include the CryoValve SG pulmonary heart valve (CryoValve SGPV) and the CryoPatch SG pulmonary cardiac patch (CryoPatch SG), both of which are processed using CryoLife’s SynerGraft technology.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of CRY – August 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,252,181,333 Fail
2. Sufficiently Strong Financial Condition Current Ratio > 2 4.97 Pass
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -56.34% Fail
6. Moderate PEmg Ratio PEmg < 20 384.02 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 4.67 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 4.97 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 1.60 Fail
3. Earnings Stability Positive EPS for 5 years prior Fail
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $0.09
MG Growth Estimate -4.25%
MG Value $0.00
Opinion Overvalued
MG Grade F
MG Value based on 3% Growth $1.29
MG Value based on 0% Growth $0.75
Market Implied Growth Rate 187.76%
Current Price $34.05
% of Intrinsic Value N/A

Cryolife Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the net current assets, and the lack of earnings stability or growth over the last five years, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $0.34 in 2014 to an estimated $0.09 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 187.76% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Cryolife Inc revealed the company was trading above its Graham Number of $0. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 384.02, which was above the industry average of 44.66. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-3.47.

Cryolife Inc scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$3.47
Graham Number $0.00
PEmg 384.02
Current Ratio 4.97
PB Ratio 4.67
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

 

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $169,698,000
Total Current Liabilities $34,121,000
Long-Term Debt $216,933,000
Total Assets $570,448,000
Intangible Assets $357,541,000
Total Liabilities $298,961,000
Shares Outstanding (Diluted Average) 37,249,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate -$0.12
Dec2017 $0.11
Dec2016 $0.32
Dec2015 $0.14
Dec2014 $0.25
Dec2013 $0.57
Dec2012 $0.28
Dec2011 $0.26
Dec2010 $0.14
Dec2009 $0.31
Dec2008 $1.13
Dec2007 $0.26
Dec2006 -$0.02
Dec2005 -$0.85
Dec2004 -$0.81
Dec2003 -$1.64
Dec2002 -$1.43
Dec2001 $0.47
Dec2000 $0.41
Dec1999 $0.24
Dec1998 $0.35

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.09
Dec2017 $0.22
Dec2016 $0.29
Dec2015 $0.28
Dec2014 $0.34
Dec2013 $0.36
Dec2012 $0.31
Dec2011 $0.35
Dec2010 $0.39
Dec2009 $0.40
Dec2008 $0.27
Dec2007 -$0.31
Dec2006 -$0.71
Dec2005 -$0.99
Dec2004 -$0.90
Dec2003 -$0.76
Dec2002 -$0.21

Recommended Reading:

Other ModernGraham posts about the company

Cryolife Inc Valuation – Initial Coverage $CRY

Other ModernGraham posts about related companies

Charles River Laboratories International Inc Valuation – August 2018 $CRL
Surmodics Inc Valuation – August 2018 $SRDX
Conmed Corp Valuation – August 2018 $CNMD
Invacare Corp Valuation – July 2018 $IVC
Select Medical Holdings Corp Valuation – July 2018 $SEM
Chemed Corp Valuation – July 2018 $CHE
Inogen Inc Valuation – July 2018 $INGN
Tenet Healthcare Corp Valuation – June 2018 $THC
Universal Health Services Inc Valuation – June 2018 $UHS
Dentsply Sirona Inc Valuation – June 2018 $XRAY

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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